Energy bills to rise to pay for new pipes

Energy bills are set to rise £6 every year until 2020 to cover the £32 billion cost of ‘re-wiring’ Britain, the industry regulator announced today.

Ofgem said Britain needs to spend £32 billion replacing pipes and wires in the next 10 years to improve the UK’s distribution infrastructure. This is a 75% increase in the amount currently invested. 

This means the average household’s gas and electricity bills will have to increase by £60 between now and 2020 to cover the cost– around £6 a year. And this does not take into account other price increases consumers may experience, due to increasing wholesale prices for example.

Ofgem estimates that in total over £200 billion needs to be spent in the next decade to secure supplies for consumers and to move to a low carbon economy.

Alistair Buchanan, chief executive of Ofgem, said: '£32 billion of the £200 billion investment challenge Ofgem has identified falls to the regulated energy networks and is within our statutory remit. That is why Ofgem’s new performance regulation model, RIIO, will ensure we attract this investment, but at a fair price for consumers'.

'The RIIO model will ensure that efficiency and innovation are hard-wired into the network companies. This means the benefits of the green economy, like more skilled jobs delivering smarter networks to allow householders to run solar energy and other types of microgeneration, will be delivered. However there will be no gold plating of the networks at customers’ expense,' he added.

Thomas Lyon, energy expert at uSwitch, said: 'Thankfully this hint of a price increase is still just a dotted line on a graph. But, we would urge households to take the warning on board just in case and ensure they snap up a competitive energy deal and take steps now to control their energy usage as we go into the winter months'.

'Even if Ofgem's prediction turns out to be a red herring, these actions will help consumers to manage their energy bills better so they will have nothing to lose by making a pre-emptive strike,' he added.